Most traders have heard or read that 95% of people who try their hand in the markets fail to make money; this is a very common myth that is widely circulated around the internet and elsewhere. However, this myth is not based on any solid evidence or statistics, rather it is a general statement that is factually incorrect and usually based on broad assumptions and flawed logic. Unfortunately, this myth also inhibits many traders from reaching their full potential and instills misplaced fear into their minds from the very start of their trading career.

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So, what are your chances of succeeding as a Forex trader?? This is a very important question that deserves some logic-based discussion, rather than the vague general statements that we so often read on the internet. Let’s tackle this question head-on with some supporting evidence and logical thought, this will hopefully give you some confidence and eliminate some of the “I’m just another doomed trader” thoughts that you no doubt have had or are currently having.

What Percentage of Traders Make Money but are not “Professional”?

This is a very important question with far-reaching implications. Basically, there are always people making money in the markets; in theory, for every loser there is a winner. However, consistently making money is a different story, so over the long-term there are going to be fewer traders who have made money than who have lost money. But, while 95% of traders may not be professional or full-time traders, this DOES NOT mean that 95% of traders don’t make money over the long-term. Let me explain…

As traders, we don’t need to aim to be “professional” right out of the gate, in fact, having such unrealistic expectations is often what causes beginning traders to over-trade and over-leverage their accounts. Your goal as a Forex trader should initially be to turn a profit each month, if you can do this for an extended period of time, you are a profitable trader, not “professional” yet, but profitable. Thus, by just aiming to make a profit each month, your statistical chances of “trading success” will jump incredibly. As you learn and become a more skilled trader, you can shift your goal up from profiting each month to profiting each week, and then eventually to pro-trading; over-time you will see your trading improve and your trading account grow. But, for now it is important to understand the distinction between “professional” or full-time trading and simply being a profitable trader or part-time Forex trading.

Thus, it stands to reason that traders who aim to just make money and become good traders, rather than aiming to become a “professional” trader right away, will have a far greater chance at succeeding in the markets over the long-term. There are reasons why this is so, I alluded to some of these in the previous paragraph, but it’s worth explaining them in more detail…

The primary reason why you are more likely to experience success in the markets if you dial-down your expectations of “professional” trading right out of the gate, is because it puts you at a much more advantageous emotional point than expecting to be a pro the first month you start trading. When your expectations are more in-line with the reality of trading, you will have less desire to over-trade, and you will feel less desire to trade large position sizes as well. Since you are just aiming to make some profit each month, your temptation to over-trade and over-leverage is far less than what it would be if you felt “forced” or compelled to make a living from your trading as soon as possible, which is unfortunately what most beginning traders feel they need to do.

Since you feel no pressure to rely on your trading exclusively for income, you release most, if not all of the emotional attachment to your trades and to the money you have at risk. This is a very important point that has far-reaching implications on your success as a trader. Releasing your emotional attachment from the market as much as you can is the easiest and quickest way to experience success in the markets, and it is done by having realistic expectations, meaning not expecting to be a full-time trader right away, in other words, Forex trading success comes from within. So, given the fact that you can trade profitably as a part-time trader, the statistics of people who trade and actually make some money each month are probably closer to 20 to 30%, maybe even more, this is far higher than the 5-10% we so often hear about.

So what are your Chances of ACTUALLY Making Money as a Forex Trader?

Ok, now let’s get down to some actual facts and figures, so that you can see for yourself what your approximate chances are of making money as a Forex trader with an effective Forex trading strategy vs. a trader without any strategy at all.

I am going to approach this in terms of risk reward, basically the risk reward ratios will be the “control group” and the trading strategy or entry method will be the “variable group”, for all of you science freaks out there.

So, let’s first look at what it takes to be a break-even trader in terms of risk reward.

As you can see in the chart below, with a risk reward of 1:1 you have to win 50% of your trades to breakeven. As your risk reward moves up you can win less of your trades and still breakeven; a risk reward of 1:2 requires only winning about 33% of your trades to get to breakeven, and a risk reward of 1:3 requires you only to win about 25% of your trades to breakeven, take a look at the chart:

If you want to be a trader who simply makes 1 times risk on each trade, you have to win 66% of time with a risk reward of 1:1, 50% of the time with a 1:2 risk reward, and with a 1:3 risk reward your winning percentage can be as low as 33% to make a 1R profit.

I often discuss the power of risk reward in Forex trading, and for good reason, it is a concept every trader must understand and it is the best way to see how letting your winners out-pace your losers makes successful trading easer to achieve.

However, risk reward is not the only thing that makes a trader profitable over the long term. You also need a high-probability trading edge like price action. This will greatly increase your overall odds of making money on a regular basis in the markets, as we will see below.

The chart below on the left displays how many winners are required to breakeven with no particular trading edge, basically, over a long-series of trades, you will breakeven by winning 50% of the time on a 1:1 risk reward ratio, 33% of the time on a 1:2 risk reward ratio, and 25% of the time on a 1:3 risk ratio. With only random entry and risk reward in Forex trading, you are likely to just perform around breakeven over the long-run.

Now compare this random entry risk reward model with the chart on the right; it shows your approximate chances of winning using a high-probability trading edge like price action trading strategies in conjunction with the power of risk reward…

Note that your chances of winning actually decrease as the risk reward ratio increases, this is because your target is further away and your stop loss stays the same distance, thus the percentage of your stop getting hit increases as your target increases, so we need to stack the odds in our favor as much as possible by using a high-probability entry method like price action.

By analyzing the images above we can clearly see that the an educated trader who has a solid Forex trading plan and who knows exactly what their edge is in the market, has a much higher probability of making money than a non-educated trader who is essentially entering randomly. The reason why the majority of traders lose money is because they number 1; don’t understand risk reward and forex money management, and number 2; they have not truly mastered a highly-effective trading strategy like price action. So, your first priority as a trader should be to master these two things.
Making money in Forex is NOT unattainable…

The odds of you becoming a profitable trader are very good if you do this, notice I did not say “professional trader”. The reason I didn’t say “professional trader” is because as we stated above, your aim at first should be to become a profitable trader each month. This is a much more attainable goal right out of the gate. Doing this will lift your chances of success dramatically because it will give you a REALISTIC GOAL and will allow you to avoid the common mistakes so many traders make due to the fact that they try to rush into being a pro right away. Start out with a plan to trade part-time successfully, you’re attitude should be to trade less and profit more / set and forget.

In closing, I would just like to say that I get feedback from my member’s all the time; emails and testimonials from people who truly are turning the corner in their trading, not because they are professional full-time traders, but because they have stopped the bleeding and are starting to see the power of effective money management and price action trading in combination with one another. Simply having a solid education in an effective trading strategy and truly “mastering” it greatly increases your chances of making money consistently in the markets.

As a Forex trading coach it is my aim to push traders onto the correct path that gives them the best chance at success in the Forex market. So, it gives me great satisfaction to know that I have helped so many traders through the quality content that I offer and the repetition of the concepts I teach, because this gives traders a far better chance at making money consistently than if they have no formal Forex trading education or no effective trading method.

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68 Comments

It was nice to finally hear somebody shed a light on the so hyped up mysterious crazy myth of 95%. Really took a load off my chest. Until now I have been counting heads on how many have been successful in trading forex, now I think I should stop.
thanx nial

Thank you Nial for sharing your valuable knowledge. It has taken me over 4 years to start making consistent profits. My advice to all is
* Be patient.
* only use spare cash you can afford to lose.
* listen carefully to Nial.

another great article. this website is a goldmine and all for free! ive been trading (badly) for 18 months now, and Im finally starting to see the light with your words of wisdom. keep up the great work mate!

I love this article. It takes everything in consideration. The people comment do not think of newton’s law. It is all relative. So with that said, they all say that there is not one loser to one winner. They are comparing themselves to a government or bank. It is funny that some people buy the same amount as a bank it government would. They are buying millions and you the little guy are buying thousands or hundreds. It is all relative. Make a little like you said is like a bank making thousands which to them is the same as what you made from what they risked. I like how some people think that they are the high rollers. Just my thoughts but I think that your article is great as I have been through these changes and have been trading for 6 years.

This is an honest and fantastic article. I only read one third of the article so far and I am already impressed, especially with the analysis concerning beginner trader expectations and how the emotions from such unrealistic expectations can skewer one’s trading success. Excellent!!!

Don’t be frigthend of the statistic saying that only 5% can make it here. I wonder how many accounts that are opened and closed due to margin call, but this is a part of learning process and count’s as failure.

This one is absolutely perfects. Articles like this should be read on and on and ona and on. Basic, basic, basic. Thank you very much Nial for you excellent work. When I get regularly profitalble I will let you know. Josef CZE :-)

I totally agree with you that the 95% statistic has no real data or premise behind it but i personally don’t think it is too far from the truth, most traders at some point get greedy or undisciplined and this often results in a wiped account, sometimes even after 2 – 3 years of successfully trading an individual will go through this stage and the fact is a very large portion of these people will quit all together whereas those that accept their mistake, learn from it and move on are those that often go onto being successful in the long term.

A very important article for anyone in pursuit of trading success. I have looked deeply into the question of why so many fail to really make it in this game, and this article really does provide most of the answers. The reality is, that most people do not approach trading as a business, they are not professional or organized enough in their approach, and do not set out to really learn the business of trading before they put their money on the line. People also come into trading with entirely the wrong mind set , and most likely because they are seeking a change of lifestyle from one they are not content with. This equates to a low self-esteem, which will then deepen as they begin to lose their money in the forex arena, and very soon , they are gone. This was exactly my situation, coming into trading from a job I hated. I bought a trading system and was very excited about earning money, lots of money, quickly, after all, all I had to do was follow the system to the tee, and I’d be almost guaranteed to make money. I grimace at the naivety of that now, but I was like just about every other new trader out there. Far from giving up however, i set about learning the game for myself, and I have spent virtually every spare moment i have had for the last three years learning how to trade forex successfully. It is now my only form of work, and I run it as I would run any business- i am organized, disciplined, and methodical, I was none of those before. I al;so firmly believe that I will become the best trader in the world, you may laugh or sneer, but I honestly do. the best bit of advice i could offer to anyone is to believe in your ability as I do, and never, ever, risk a penny of your money until you have doubled your demo account several times over, and then only risk it on a micro account. After that, the sky really is the limit.

As a newbie in forex trading, I aim to make consistent profits from my forex trading but have stumbled and fell many times along the way thus losing money instead of making money. After reading your article, I am aware of my mistakes and would definitely apply the idea of having a trade plan with proper risk reward ratio and also using price action to trade instead of all those lagging indicators. Very interesting article indeed! Thanks.

great encouragement Nial, I’m a complete newbies and I have blown my 3 live micro accounts, and I felt failed. I should have taken your course before I open live account, and now I have to save money if I want to get your course and trade live again. LOL.

Very good article, I can finally see risk to reward alot better now since I found you.Letting the market do the work and not biting your fingernails on each trade is a breath of fresh air.To all newbie like myself stay on it . “You can’t fail if you don’t try, if you don’t try you already failed”. listen to Nial. Thankyou

As I have learnt, when trading price action with a trading plan, my risk reward ratio equals profit. When I consistantly profit, my natural reaction is to increase my risk reward ratio. As a consequence my emotions end up driving the temptation to over trade because of my confidence. When I experience loss I rethink my strategy and remove my emotion and go back to my trading plan. Fortunately my threshold to except loss sends me an “alarm” telling me to stop, restructure and review my methods. As always your words of wisdom is confirmation of my own process. Thanks Nial.

Thank you Nial,
I have learnt so much from your lessons. Risk reward is so important in fx trading.
Thank you for putting so much energy to provide articles, videos, daily Commentry. This learntotadethemarket membership is great value for money.

You hit it right on the head in your article about 95% of traders don’t make money in forex trading as being a myth. It’s about time the truth came out. It’s not rocket science trading forex. K.I.S.S. Personally, I went back to trading after not trading for a couple of years and reeducated myself on the markets. I doubled my account in (2) weeks with what you taught me and I added some of my own analysis to my trades.

Thanks Nial,
A great article,a good real lesson. For some time, I am loosing money again and again with out any control,but I admit myself that my reaction to the market is like a gambler,no princple,no patience,rule or any plan.I will be successful in trading,but I have to change these bad habits and for ever.Either stick to the rules or forget the trading.That is the promise.Thanks Nial for openning my eyes so many times and this will be the last time.I really enjoyed this article,a very valuable lesson.thanks

I’ve been following nearly all your articles for good few mounts and found them very very helpful. I’ve started trading real money a week ago but just wiped out my account quickly and now I’m sitting and thinking what went wrong. I can see that I didn’t follow your advices and wanted to make money too quickly. The stuff you come up with this time is just shut in 10!!!

Hi Traders!
The reason I chose to learn from Nial is his ability to demonstrate sound logic which is core skill in money management. His capability to clearly distinguish between self and mind is in truth applied spiritual philosophy at its best. It appears to be much easier to succeed at FOREX with Nial guidance. Before I get carried away I want to say, “Another great article, Nial”.

Nial has enforced in his earlier videos that we must watch for what the instituitions will do at confluent levels. Their game plan revolves around lucking obvious stop loss points and then allow the market to move in the favoured direction. This happens now and then, i have been nicked so many times, which prompts me to set my SL even higher….. Thank you Nial.

What can I say but wow! This clearly explains why winning percentage means nothing and it’a all about having a high probability edge and a postive expectancy system! Thanks again Nial for another valuable lesson. Excellent article!

Like you say: IN THEORY for every loser there is a winner or for every winner there is a loser. IN PRACTICE this is absolutely wrong. A big part (if not the biggest) of the participants in the forex market are entrepreneurs and governments buying foreign products. They must change their own currency into the foreign currency to pay the bills. They are never loser and buy from the winners!

Karl.. i don’t completely agree with your comments, but some of what you say is correct. In theory.. for every loser there is a winner in forex.. but I agree, this is NOT true. There is a small group of traders/governments and banks that control a very large part of the market, and they are not trading, they are basically just ‘exchanging’. The thing to remember is.. companies and banks can still make a profit/loss when ‘exchanging’, but it’s measured in a different way. Take for example an Australian exporter selling to the USA. He is selling things in USD.. and at the moment he is getting 20% less profit than he would have 2 years ago. Hedging currency is also a risky business for these large players, and many get caught. The larger players in the fx market can still win and lose.. even though they are not always participating as traders

Great article Nial,Hits the nail on the head with % of new traders that are Likely to succeed & why.I like the way you keep a “back to basics” approach to trading,promoting tried & tested risk & reward laws of trading essential to success Kind Regards-Andrew T.

Errr…. only one thing I don’t understand: If you need 50% of wins to BE on a 1:1 risk:reward ratio, 33% on a 1:2 r:r and 25% on a 1:3 r:r shouldn’t you need just over those figures to make profit?? For example, if I need only 33% to BE on a 1:2 r:r then 34% wins on a 1:2 r:r should make me some profit. Why does the table show 50%???
:P

Good article. I like your approach to trading. It makes sense and enables profit. Maybe there should be more said about setting realistic take profit to avoid unneeded losses and to raise % of winners.

Hi Nial, a big thank you for this valuable information.This is an encouragement for us new traders and gives us a new positive thinking which is different from what we were previuosly taught almost every where on the internet.You’re one honest teacher and am looking forward to joining your paid trading forum soon.Thanks you are a blessing to us…

Very good article Niall and timely for myself as I have been reviewing my trading over the past couple weeks and it’s very apparent that I’m trading too much with the wrong ratio’s but on the plus side I’m getting to grips with price action as I’m getting the winners just not letting them run. One thing that should be mentioned is keeping a journal of all your trades as its a living document that give a new trader like myself a point of reference to analyse what’s going right or wrong.

Good article. A lot of what you say hits the mark in my situation. I’ve been demo trading for 3 years now. I am planning to start trading for real in 2012. Although I’m not trading live yet, i would say the biggest hurdle i have had to overcome during my learning period is being able to release & detach myself emotionally from the wow! look how much money i could have made there when looking at charts in hindsight.

Great article to share with especially a beginner trader like myself and I failed because I didn’t follow a Trading Money Risk Management Plan.So to become a Profitable Trader as you mentioned in your article will be considered a success for me.

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